is north of 8 per cent and the Bank of England is aggressively raising interest rates to cool soaring prices.
It’s the kind of extraordinary action that central banks take in response to some sort of major, unpredictable external shock – a pandemic, perhaps, or a war – that sends markets into dysfunctional, panicked convulsions. In advanced industrialized economies with sophisticated finances and well-formed institutions, the cause is not typically the hairbrained economic schemes of one’s own government.
The jarring week demonstrated just how little tolerance the markets have right now for fiscal policy experiments and government wingnuttery. They’re having enough trouble trying to absorb the ever-rising expectations for central bank interest rates. But at least the application of monetary policy is pretty standard and well-understood stuff, even if the trajectory is out of the ordinary.
There is a lesson here for any leaders – including those in Canada – tempted to stray too far from the beaten path in their attempts to address the public unrest that has emerged from the pandemic.